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Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute. A former senior vice president and chief economist of the World Bank and chair of the US president’s Council of Economic Advisers under Bill Clinton, in 2000 he founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump.

According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.
what i have a hard time understanding is why? since the US Great Depression there have been a few opportunities....especially since the 2008 crisis for world leaders and economist to see the REAL WORLD implications for both Austerity policies & Economic Stimulus policies. Time and time again not only has the Economic Stimulus route prove to be very effective in times of depression or severe recesion, but austerity has also proven time and again to make the situation worse. In the case of the US Great Depression we even had an example of stimulus working only to have new austerity polices reverse it. So again I ask with many real world examples of stimulus working and austerity not......how is it possiblethat so many smart educated people continue to not only advocate for austerity but to make claims that it will help? Now I am a pretty smart person, but I do get things wrong from time to time, so if anyone can site real world examples of when austerity has worked or when stimulus has not please let me know. if anyone can explain to me how despite ANY evidence to the contrary austerity continues to be advocated as a good idea. Austerity does have a use in economics and there certainly is a time when it can and should be used....but i have a real hard time understanding why people keep advocating for it in THIS situation

I have to disagree with you I'm afraid. Germany has benefited from the weak Euro, weakened because of the stressful adjustment across the Euro Zone to the financial crisis. The adjustment of the weaker states within the EZ has been very difficult because of externally imposed austerity. Ask the Greeks, Spanish, Irish and Portuguese how they feel about austerity. If there was no Euro, adjustment within a free floating multi-currency regime would have been significantly less painful for them. As for France, there are so many inflexibilities in its economy, adjustment is problematic. A Euro sufficiently weak enough to benefit Germany is not sufficiently weak enough to benefit France entirely.

"But, if Greece is to implement these reforms successfully" ... you said it yourself. The blatant absence of implementation of such urgently needed reforms or just it's willingness is at the heart of the problem here, which makes every effort that has to come after it, obsolete! A fact, that can only be explained psychologically not economically!
Read more at http://www.project-syndicate.org/commentary/speech-of-hope-for-greece-by-yanis-varoufakis-2015-06#MJVdvqSAzlyKqO9h.99

Not the first time the IMF has 'misjudged' macro-economic impact (e.g. Asian Crisis from which Indonesia is still recovering), and I guess, it will not be the last. If indeed the IMF can continue to be funded given its shareholders' combined national debt.

It's a race to the wire with stupid in the lead by a nose over Imbelic Ignorance. How much is the trioka on the hook for if they just bail Greece out and start over with theconomy at zero and building. The austerity policy imposed on Greece is more punishment for sins comitted than corrective action for an errant economy.

Whe you listen to stupid, you act stupid. How long do the Germans think this idiot crap should go on? They have blown everything they have forecast for this idiot endavor with austerity. Do I seem redundant when I scream STUPID, STUPID, STUPID?

They developed a plan. I don't ev en want to see it. It's got to have more logical and mathematical fallicies and errors than can be believed. No one have yet provided me a good ezplanation of how shrinking an economy makes it grow. Shrinking just accomplishes one of the things that shouldnt happen, a downward spiral to deflation oblivion.

We are experiencing the abject ignorance of folks who think making something worse will eventually make it better. If it is not fixed to improve, it's not going to improve!

Germany is going to be very unhappy and be all over the Greeks because austerity is an incredibly stupid economic action and is only going to make things worse and the worse they get, the more it will cost the Germans when they finally get on the right course.

Ireland and Spain both are improving aftergetting bailouts that allowed them to implement some austerity measures that didn't destroy the economy and have been able to start a recovery.

“European Union leaders continue to play a game of brinkmanship with the Greek government. “

The question is why are the Northern Europeans (NEs) doing this? Why are they playing the game with such ferocity and intransigence? Is it merely to save face and escape admission of past decision making errors? Surely, the stakes are higher than this? Could it be the NEs have concluded that Greece cannot in any meaningful way service its sovereign debts under any circumstances, so they have decided to sacrifice Greece and push it out of the EZ/EU and use it as an example to other financially troubled states considering diverting from the path of austerity. This is a desperate ploy, probably perceived as being the one with the least risk and cost, given the NEs appear to believe that the European monetary system is now insulated from the contagion effects of Greek default and Grexit.

To further drive home the message to other recalcitrant states in the EZ they could potentially further punish Greece with a range of measures such as:

- Sequestration of private Greek assets held in Europe as recompense for defaulted sovereign debt
- Close European markets to Greek exports, such as they are
- Ban travel by Greek officials to Europe, etc..

Perhaps all these are too draconian and even illegal to consider. I don’t know. It seems the NEs are want to send a strong uncompromising message, in this context it’s difficult to know how far they will go.

If Greece capitulates to all of the demands of the NEs as the price for staying in the EZ/EU, then the NEs have won comprehensively and will have managed to send a powerful message.

It appears the NEs believe they will win either way.

“The future of Europe and the euro now depends on whether the eurozone’s political leaders can combine a modicum of economic understanding with a visionary sense of, and concern for, European solidarity.”

Indeed, the politics extant when the euro was implemented were inimical to its success. It may be said that the euro was NOT intended to work, except to enable bankers' power, and erode states' power.
A certain neo-liberla Friedmanist, Robert Mundell, designed the euro mechanism to further these agendas. Read --
http://www.gregpalast.com/the-euro-is-a-big-success-no-kidding/
Greg Palast was educated at M Friedman's alma mater, and knows of what he writes.
-- Incidentally Dr Stiglitz, thanks for coming Down Under and attempting to penetrate the clouds of ignorance.

Excellent article. The Euro project is both a tragicomedy and a tragedy, and the only drama that comes close to classical Greek tragedy. The Euro project tells us something important about what it means to be a visionary: a visionary is an escapologist, someone who leads a nation, or a corporation, out of dire straits. Winston Churchill and David Ben-Gurion were visionaries; Hitler was only a megalomaniac. The founders of Internet companies (Google; Facebook) are less visionaries than megalomaniacs; but Swatch-founder Nicholas Hayek was a visionary, who breathed new life into a Swiss watch sector that was technically bankrupt. Visionaries only appear when all is lost.

There are two forces at work here: first, banks loaned Greece too much money during the halcyon years of the strong Euro which Greece squandered on non-productive public sector spending. This spending represented an increase in its deficit. The second is that European taxpayers should not have to continuously subsidize wasteful Greek spending. That is a problem for the Greeks to resolve. The solution is for Greece to default on its loans and renegotiate a write-down of that debt with the banks. Second is that there will be no new loans to support government spending when there is no demonstration that those debts can be repaid. That will be up to the banks to determine. If the Greek people want to finance their 0wn deficits let them.

the problem with your idea is multi-facited. First, if the Greeks actually "default" that would trigger payment of the "credit default swaps" (the same type of instruments that greatly contributed to the 2008 meltdown in the housing market). this of course would trigger a much larger crisis. Second, the problem with the loans is not that they were used to further support the deficit spending of the Greeks, but rather that it only served to pay the bankers and lenders..a VERY VERY small percentage of that money actually went to any part of the Greek economy. the loans ere never meant to help the Greeks, they were meant to make the rich richer, you claim that all that money was used to say pay huge pensions is misinformed. This is not to say that Greece does not need to make some reforms, of course they do, but in addition to that they need massive stimulus spending as well to rebuild their nation and put people back to work.....this would increase revenues and GDP alongside of the reforms. This coupled with real debt relief would both help Greece and put them in a position to repay the new debt. This exact scenario has actually been tried and worked many times over in the real world, which is why it is so hard to understand why so many smart people have just chose to ignore the lessons of the past. the only reasonable explanation is that the bankers and the people in control care more about the banks and lenders then the Greeks.

Welcome to the latest European Bunga Bunga party. Drinks are on the house, however, you must bring your own protection against STDs (Serial Traumatizing Deficits). Apparently the only cure known is severe and persistent austerity administered trans-urethrally. Unfortunately, the cure is said to be worse than the disease.

I read all of the very fruitfull commends. There are two major poles. Those who support Greek case (minority)and those who do not(majority).
I think that those of the majority did not understand in depth Mr Stiglitz remarks. Mr Stiglirz has put the case straitgh forward in saying that
"The swing in Greece’s fiscal position from a large primary deficit to a surplus was almost unprecedented, but the demand that the country achieve a primary surplus of 4.5% of GDP was unconscionable".
In addition Mr Stiglitz adds "The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.".
So considering all the above you cant blame a nation of being "such and such" when for many years live on a certain economic and political status.
And in the end, who are those voices everywhere
in the world who demand strongly from the Greek people to change?.
Are they Gods?

Fully agree with Professor Stiglitz. Even not being an economist, I saw the catastrophe coming ... and by the way, the IMF is imposing similar extreme measures on certain countries, i.e. Jordan. Jordan is in a regional turmoil, nevertheless IMF insists on austerity measures, increasing tax revenue etc. ... just do all to stifle private business environment ... :(

"The most important consequence, I fear, is the weakening of European solidarity. The euro was supposed to strengthen it. Instead, it has had the opposite effect."
This I think the greatest misunderstanding leading all of us into ever greater crisis.

Solidarity cannot be built or strengthened by economic or even political means.
Such an idea only works in the current human illusion, bubble that views life through markets, quantitative growth, profit and the health of financial institutions.
We forgot completely we were human beings, social creatures and not simply producers of goods and consumers.

There is no solution to any facets of the all consuming global crisis until we return to a "humane lifestyle", societies built on humane values, life based on natural necessities and available resources and most of all a life focusing on the positive inter-relationships in between people.

While I fully agree with Professor Stiglitz lucid and elegant warning about a significant underestimation of both the current and future risks of Greek situation I am thinking weather a financial relief would remedy this situation. Indeed, it is the case that bond yields could spike, and no amount of reassurance by the ECB and Europe’s leaders (and I would add to this list the US and China’s economic leadership) “would suffice to bring them down from stratospheric levels”. Unfortunately, it seems many believe that the US’ tenuous growth performance in recent quarters can act as a buffer should this crisis come to pass and US economy alone can drag the global economy out of its predicament. This will not be the case.

As an updated chart by Schoenmaker (2015) from Borio (2014) shows the amplitude of the financial cycle over the 1970-2013 period has persistently widened and in fact exhibiting an alarming explosive pattern (see; https://www.imf.org/external/np/seminars/eng/2014/ireland/pdf/Schoenmaker_IrishBanking.pdf Figure 1, p4). My take? - The next financial crisis will be a crucial one.

Greece's situation could be a trigger, and the G7 summit needs to put this question on the top of the agenda. Every economist MUST know by now that to raise a primary surplus by 4.5% of GDP, amidst of the 25% decline in her GDP since the beginning of the crisis, would only be possible if the current production possibility frontier can be expanded by about 30%. This would only be possible with implementation of an immediate and vigorous new Marshall plan that would focus solely on expansion of Greece’s real production frontier. While a sovereign debt relief programme similar to the Brady plan of 1989 can provide an immediate financial relief it won’t do anything for the real sector over the medium term.

Greece’s situation is only one trigger among many for the start of the upcoming financial crisis. The situation in China, the Brexit dilemma, the unsettled currency wars, the Russian question, the upcoming American election and Fed’s policy options, as well as a list of other problems in southern Europe, Middle East, and Latin America all are lurking in the horizon adding to the urgency of tackling this challenge in order to be well prepared for the next one.

Professor Stiglitz is indeed correct to note the naievity of some European leaders, particularly in Germany who have convinced themselves that a Grexit will pose little trouble to the EU economy. This is sheer wishful thinking as a Grexit will immediately open the door to a new wave of speculative attacks on the next weakest economy, perhaps Spain or Italy. The EU's armour will have been breached both materially and psychologically, undermining economic and colloquial solidarity. It will be the beginning of the end of an era, and not in a positive form. When the Germans stop trying to get blood from an already squeezed stone and remember that the EU is more than an economic union but also one designed to create bonds of friendship and decency then a deal which benefits all will be done. However there is no guarantee they will rememeber this before it is too late.

One more example if Stigliz's lightweight work - zero reference to the EM experience. Brazil for example has maintained a positive primary surplus for two decade more or less. In the early 2000s it ranged 3-4.5%. This is a country with huge social needs and a massive infrastructure deficit. the state accounts for 55%+ of investment and spending when states entities are included. And yet somehow Brazil has been able to survive and at times prosper...

Stiglitz at his least impressive. All that is missing is the kitchen sink in a flow of unquestioned reasons for giving Greece a freebie.
The peach is "Greece has demonstrated a willingness to reform", in a par with his reverence that Greece had talked to the OECD about how to improve.
Stiglitz has been criticizing US policy for decades and it shows in his sweeping comment that the financial system is so fragile that it could collapse at any moment. It annoys him immensely that the Fed and Treasury managed to avoid collapse and clean out these system, perhaps because the didn't ask for his help? Hie equating Greece with Lehman is completely unsupported beyond ominous warnings and a clear dislike for Draghi.
His descent in geopolitics does have one coclusion - he should stick to economics. As for the famed European solidarity, he could be reading from a Syriza press release. Has he not noticed that the average European has not interest in Greece nor in paying for it? And where exactly in eitehrbthe EU or EZ charters does it say that the member states are responsible actually or morally for the debts of another?

Greece's problems are entirely made in Greece. Those all-purpose villains, the banksters, have at best a bit part in the Greek farce. Nor can Greece's troubles be blamed on Stiglitz's usual suspects -- Greece's oligarchy or inequality.

Greek corruption is quite democratized. Just about everyone seems to be on the take. Consider the following:
- a bloated public sector that is used to provide jobs for political supporters,
- tax authorities who don't collect taxes and a citizenry that doesn't pay them,
- official tolerance of cartels in one occupation after another,
- bureaucratic red tape that strangles start up businesses,
- an economy that ranks 40/43 in Europe on economic freedom -- just a whisker more free than Putin's Russia

I don't care if the bankers or other investors for making foolish loans take a bath. But, unfortunately, it is German and other EU taxpayers who will be on the hook for the bailout. Nothing justifies throwing good money after bad. You don't cure a junkie by giving him more free heroin.

What are the odds that, next, Stiglitz will be pushing for a federal bailout of Illinois? You read it here first.

Ian: I am a staunch critic of my compatriots; "serious issues" hides a lifetime of personal experiences that would make even the biggest sympathizer (such as Prof. Stiglitz) scream in anger. Greeks are no more perfect that any other nation (and then some, perhaps).

Also, this is not "bank bashing". What I truly detest is the dirty orchestrated assault of a vindictive political and financial cadre using all "justifiable" means necessary to humiliate a sovereign nation into total submission to a failed policy instruction sheet as an example to other sovereign nations' aspiring incumbents.

I truly apologize for making this sound like a cheap conspiracy theory, but sadly the reality is there: the populist propaganda mill ("lazy Greeks"), economic pincers by an otherwise "independent" ECB, unwavering conviction in the pan-European application of German ordoliberalism and the unabashed continuation of the contractionary policies of the IMF toolkit, years after admitting they were wrong.

I see an immediate, absolute need for a paradigm shift in Europe. Let's call Euro a less than ideal instrument, as it stands now, in both monetary and democratic contexts and either "go home" or take it to the next level and fix it.
I would sincerely hope that the latter wins; it is a sad state of affairs when this is not the central discussion point and the only ones being vocal/heard are the elected SYRIZA clowns. I truly hate the fact that momentum for change is lost because of our elected idiots but that should not diminish the need for it.

What you therefore describe as "unwillingness to reform" is merely Tsipras' et al. interpretation of the above argument. He is not the most diplomatic statesman out there but he is unfortunately the only elected one opposing this failed austerity experiment (the "real reforms" you mention). The effect he has (on me) is that of a really bad singer singing a favourite song, where you physically cringe every other off-tune note...

(Also, having re-read my comments, please do not misinterpret the -arguably misdirected- frustration as personal. I would not presume to "lecture" anyone.)

Nick: You admit that Greece "has serious issues." So don't try to obfuscate that issue by bank bashing. Nothing the banks have done diminishes Greece's own responsibility for its mess.

The EU's dilemma is that Greece is that Tsipras's unwillingness to reform the Greek economy guarantees that Greece will be a permanent economic basket case, necessitating additional Bailouts every 5 or so years forte rest of history. Like Simon Nixon points out in the WSJ, Greece "raised pensions and civil service wages to unaffordable, near German levels." Today Tsipras is fighting EU demands that he roll back those giveaways.

It would the a crime for the EU to throw more money at Greece without real reforms that hold out hope that Greece may eventually stand on its own two feet.

How convenient an analysis, effortlessly circumventing how (elected and unelected) political personnel, in an unprecedented display of "solidarity", turned private Bank debt into European taxpayer debt. Greece has serious issues but using EU taxpayers as human shields was a masterful stroke. I fully expect to see crying Latvian children in Tube ads with a "Save them from Greek default" titles.
I would definitely agree though, "foolish" private loans, backed by taxpayer money is truly deserving of a lush bubble bath for your average banker.

Interesting. So many folks feel that socializing the debts of banks is an essential goal of our civilization. Removing the possibility of bank default is a priority, even if the culprits in the banks have already taken all the illicit gains and suffer none of the financial hardship, let alone the legal penalties for their actions.
Volcker has remarked, Dec 2009 - 'I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth; one shred of evidence.'
The banks put the world's financial system into crisis, for what? The banks were bailed out, for what?
Why have so many meekly accepted socializing the cost of bank failures although even when they succeed they add nothing to the economy?
And why are so many commenters here so willing to throw the people of Greece under the bus to save a few banks?

For what? Are you really this obtuse? In 2008 ten of the 12 largest banks in the US were zombie or near zombie. No doubt allowing them all to implode would have do wonders for your sense of self righteousness but unfortunately it's more complicated than that as Hoover and Mellon discovered when they succumbed to the same emotions and the entire US financial system collapsed. And btw the banks were largely out of the Greek debt vise years ago (80% of the debt has now been assumed by the Eurogroup governments and the ECB/IMF) so none of them are going under but your ignorance of this basic fact is fair commentary on your overall level of understanding.

With all due respect to Germans, but for all their smarts and work ethics, sometimes their skulls can become thick to the point of constraining their brain growth just like the Doberman proving deletereous a couple of times. To be sure, Greeks are liable of misrepresenting their true fiscal situation as they applied for euro membership , and so is Germany as it chose not to exercise proper due diligence as Greece was allowed in the bandwagon . Almost like realizing being one rich guy got married to a hooker who misrepresented herself as a virtous virgin making a divorce costly for all. Tough luck!

If it wasn't for the Marshal plan German's would be starving. Europe was complicit in the misrepresentation of their fiscal position. I live in Australia and could see this coming from here. My friends were all laughing when Europe announced Greece had qualified.

You have to wonder what world Stiglitz inhabits. Far from meeting their creditors half way the Greeks have reneged on every commitment they've made and it's quite obvious they have no intention whatever of making a serious effort to reform the Greek economy which is what this is all about. His Gotterdammerung predictions are ludicrous. 80% of the Greek debt is now being carried or guaranteed by Eurogroup governments, the ECB and IMF. Thus any danger of contagion in the financial system from a country that represents about 1.5% of EU GDP is negligible which is why markets have largely shrugged it off. In fact the continuing uncertainty is more of a problem than bringing closure to this situation. Comparing a Greek default with the situation at Lehman in 2008 is risible and doesn't do a lot for the credibility of Stiglitz. And his suggestion that there has been some weakening in European solidarity flies in the face of the total unanimity of the Eurogroup in the face of Greek dishonesty and the bizarre antics of its finance minister. I'm far from being a freshwater man but really Stiglitz needs to get some sense of proportion here.

Why is there no mention of Portugal, Ireland, Spain or Estonia? The issue here is not economics but politics in the best sense of the word. How do people and nations interact in an orderly way. Giving in to Greece may be good economics but it is disastrous politics. Stieglitz is a narrow-minded economist unable to see the big picture. When nations lie for decades they do not end it with calling other Nazis but by apologizing and asking how can they make it right.

"Greece has made clear its continued willingness to engage in continued reforms..."
Shame on you! Even Paul Krugman admits that "given Greece’s track record, it’s hard to trust promises of reform." Reuters quotes a euro zone source as saying that Tsipras's last proposal "contained no significant concessions on the main outstanding issues of pension and labor market reform, fiscal targets and the size of the civil service."
Greece still proposes to go on living irresponsibly at the expense of its European neighbors. Is that what you mean by solidarity?
Tsipras is refusing to commit not to roll back the labor market reforms initiated by the previous government which make it easier for employers to hire and fire. He also wants to gradually raise the country's minimum wage to the 2010-level by the end of 2016.
Stiglitz knows no better than anyone else what the effects of "Grexit" would be. The EU is in better shape to handle those consequences than before.
Stiglitz utterly neglects the risks of caving in to Tsipras's blackmail on terms that are widely seen as a victory for intransigence, lying, corruption and vile xenophobic rhetoric. That risk can be summed up in one word: "Podemos." Greece is just the first domino. A bailout of Greece will inflame populists across the continent who will emulate its tactics and demand the same concessions. Stiglitz's solution would mean that the greater a country's economic mismanagement, the greater would be its bargaining leverage over its neighbors.
It is time for the EU to show some backbone. It should demand that its most recent bailout proposal be put to a vote of the Greek people. If they don't approve it, then the EU should face the inevitable.

1. Create a unified (federal style) Goods and Services tax that supercedes many sales and excise taxes, as per the Canadian example in 1991.

http://en.wikipedia.org/wiki/Goods_and_Services_Tax_%28Canada%29

2. Use the revenue from the GST on a per country basis to levelize Debt-to-GDP levels to 75% of GDP -- while each country runs balanced budgets -- or, up to 1% of GDP surpluses.

3. Allow better capital and labour mobility between EZ member states, with a minimum of red tape.

Lowering Debt-to-GDP levels to 75% of GDP among all EZ nations over 20 years, running balanced budgets (or a 1%-of-GDP surpluses) and replacing many business or consumer unfriendly taxes with one unified tax -- will make every EZ economy perform better and more able to withstand future economic shocks.

Not to mention lowering barriers to trade between EZ nations -- and possibly lowering barriers to trade with nation states outside of the EuroZone.

And that's all good.

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” -- Buckminster Fuller

The federal government collects the GST revenue all year and uses the proceeds to pay down debt and run balanced budgets or slight surplus budgets (in good years) and in bad years, that additional revenue helps to levelize the economies of each province and territory.

Provincial governments that run a tight ship, don't need a bailout from the federal government.

But some provinces are dependent on wildly fluctuating oil and gas prices, so they can have a bad year even though they run a tight ship.

Nobody minds that here. Sooner or later, the province you live in will need a federal government bailout for a year or two.

Come in Major Tom...What makes you think that the European voter has any interest in paying a tax to bailout the PIIGS? And whatever would the point be? Even the US doesnt stand behind the debt of the states and munis

Stiglitz's position is that we should do everything to save Greece in order to save the euro and the EU.

In my opinion the euro and the EU in their present form don't deserve to be saved. They are destroying democracy within Europe and they form an economic constellation that cannot be saved without a constant stream of market distortions.

I don't have a solution ready and I know that the EU is very smart in using every crisis that it has created by itself as an opportunity to grab yet more power. However, it has to stop one day.

When will people understand that a country or in the case of EU, a group of countries that has full sovereignty on its monetary and fiscal policy is not like a company or a household ?? Debt does not mean anything, this is only a vector to tend toward full employment. The future of EU or any country that has full sovereignty on monetary and fiscal policy is doomed if people/politicans does not understand theses basics economic concepts. Greece should be allowed to re-structure its debt and allowed to stimulate fiscally its economy - big time -
Because of the massive pro-EU propaganda in the local media (Greece can not survive out of the EU etc..), Greek people do not understand yet that they will be much better out of EU - but maybe this will change....

Mr Stiglitz:
You are obviously not dealing with your own money. Giving credit to people who don't know the difference between a want and a need is a dangerous game to play.

It is easier to be the beggar; hang in there, keep your hat on the ground, make nice, look deserving if not entitled and play to the crowd while the ones with money wrestle with their conscious. It helps if you have a small dog or a small child with you.

It is a good game to play. Back in the mid 1970's there was a famous street performer/beggar who's spot was in Ghiradelli square in San Francisco, he always had a smile. He would disappear each summer, I knew him and liked him. The SF Examiner did an article on him, he made >$150,000/year from his act and he spent his summers in Greece!

It is essential to know what the government of Greece intend to do about his future in the eurozone I´m liberal Democrat and I am in favor of a real change in Greece if the Greeks do not do that real change then let them go do the beginning

The observations made regarding the Euros performance are so true, since its inception in 2000 it has caused a massif rise in prices that has in my opinion been partially responsible for the decline in Europes economies along with the shift toward globalism.
It would be refreshing to hear Europes architects acknowledging the truth rather than this constant pursuasion to endure the discomfort because this high ideal is more worthwhile in the long run; sacrificing a generation in the process .
It is rumoured to be two principal lenders one French and one German who are the obstacle, how can two institutions be allowed to hi jack a nation state, some suggest the euro crisis has been staged as a back door bail out mechanism.
The EU security policy will be in tatters as will cohesion if Greece is forced to exit, hardly an example Brussels should be setting to pursuade the people of Europe on the merits of membership and federal union.

Statist or communist bank regulators, in1988 with the Basel Accord (Basel I) set the credit-risk-weights for the capital requirements of banks at zero percent for government borrowings, and at 100 percent for private sector borrowings.

In doing so they were de facto simultaneously declaring that the bank-credit-productivity-weights were 100% for government bureaucrats and zero percent for the SMEs.

That is when Europe (and the rest of the Western world) began its downfall

1. Quote “Having said that, there is room for a deal: Greece has made clear its willingness to engage in continued reforms, and has welcomed Europe’s help in implementing some of them”unquote:
Question: Professor, if you were a creditor would you look at the performance of the Greek government and felt assured that the reforms needed to turn Greece into an “independent” country ( i.e. no need to continue living subsidized by the other EU members = people ), will be implemented ? Honestly, does the track record of the current government, leads you to believe the reform of the state and society, required for Greece do be a “free” and “independent” country, will take place under the Syriza Gov. ? Under a government that has shown no willingness – not to mention ineptitude - to put a stop on the many vested interests ( from pensioners to oligarchs ), deeply rooted and responsible for Greece maladies?
2. Quote “The future of Europe and the euro now depends on whether the eurozone’s political leaders can combine a modicum of economic understanding with a visionary sense of, and concern for, European solidarity” unquote.
Question: Can you please define “solidarity”?
Is it a one way and never ending road ?
3. Finally, please let us know if you really believe that FREEDOM is a free lunch? And aren´t the Greek people entitled to be FREE ?
Sergio Paradiz

I understand Prof Stiglitz's points, however he has always taken a Keynsian approach, which has often not worked out.
In this case I separate the issue of Greece into two prts: moral and structural reasons for giving/refusing further loans without imposing requirements to actually privatize and cut public pensions.
As to morality, I simply can not conceive of why the rest of Euroland would feel morally compelled to continue giving Greece more loans when many pensioners can retire at 95 % of their final salary at age 50 when their own workers have to continue toiling into their early 60's, and Greece is justifiably notorious for not collecting taxes from ts rich and powerful. First collect these taxes...through enforced laws or by easy to enforce VAT taxes and then redistribute proceeds to the truly desparate...only after this is done, should taxpayers in other EU countries be duty bound to support the poorest
There MIGHT indeed be structural reasons to renegotiate loans (after full privatization and reform of the job stifling bureaucracy) , but Stiglitz, as is typical ignores the second order consequences of such a policy. A number of Eastern European countries as well as Ireland, Spain and Italy have all to one degree or another stopped the bleeding and have either fully recovered or appear on the path to recovery...with a lot of hard work. If Greece is seen to "get away" with stiffing its creditors..one could easily see where successful austerity minded governments that have taken on excessive government spending would fall across the continent...in favor of yet more socialist ones...not likely to be a good result in the long run for Europe

Stiglitz expects/wants to see ".. political leaders with a modicum of economic understanding ..." (What planet does he live on ?) and then he wants them to display ".. a visionary sense of European solidarity." Really?
Since when have politicos "Visions" proved even third rate viability ? Let alone anything really welcome ? Visions are very risky, with a failure percentage in the high nineties. Most dreams are bubbles that burst: (Oh, yes, politicians have "visions" - you and I just have pipe dreams: but it's just the same difference.)

But what can you expect from a "Nobel" (really Swedish Bank yes-man) laureate ?

With all due respect, meeting half way is not sufficient ... Greece has broken too many commitments over the last years and their politicians have proven to be incapable of making the reforms that Greece needs - especially the current government. Unfortunately the people are suffering the consequences of years of corruption and mismanagement - but then they also chose those politicians. The only credible reaction of the Troika is not to back down - otherwise other countries will start making similar demands to Greece and once a precedent is made it's difficult to change.

The neoclassical proposals have widespread within the ceteris paribus, but the harsh reality causes the collapse of them - because no consider people and its complexity; so its mathematics is overwhelmed by the social, so its work only aims to make their patrons be happy. Globalization effects makes strengthen to Keynes.

Stiglitz has been right about eurozone from the beginning. He right again, when saying that Draghi’s confidence trick will not work this time; it's clear EZ members will not do “whatever it takes” and, by now, it is also clear that the hands of the ECB are tied. EZ southern countries' bargain is very risky on a Grexit.

Solutions are astonishingly simple. Agree to a pan-european political *mechanism* for setting conditionality, instead of the current, non-political, fixed, "expert"-led, authoritative and oligarchic approach. It must be really much more political than the eurogroup and ruling parties in member countries. That's democracy. Accept that usual debt and interest cannot be used. Quantifying, in a single step, how to replace the ECB, as lender of last resort, with European fiscal authorities, is intractable. Postpone the discussion on the political mechanism for later, but set a starting date. Stop excessive (and excessively failed) austerity claims and accept ILO intermediation for labour law regulation, or suggest another intermediary. Forget doctrines for reducing the public sector of a foreign country and reducing pensions (dictating policy), usually embedded in austerity. That's it! A deal can be made!

The potential downside in geopolitical terms is large for all.

On economic terms, it depends on markets being convinced that other potentials are more adamant on sticking with the euro (very doubtful), or are out of the woods. Possibly, the spike in bond yields will not be excessive, but it will last and will subjugate southern countries to continued economic stress, whenever leftists raise their percentages. It will exaggerate market imposed neoliberal doctrines, as was the case for Greece. Will there be a next one down the road? If one is likely, it is Portugal, I would say. Will that affect the EU? How will the EU handle EZ-exiting countries' debts?

Some more details on my thinking:

(a) Germany has not been following its own position, "sweating in front of its own door," as Wolfgang Schäuble suggests for all (that is regarding German banks lending the Greek government, where Germany should have taken part of the hit, not to include war reparations);

(b) replacing the monetary authority, as a lender of last resort, with European fiscal authorities, was never in the treaties, it is an ad hoc approach and has been included/forced in EZ institutions during the crisis, when southern countries had an existentially weak negotiating capacity;

(c) fiscal replacement of the lender of last resort role of the central bank has been provided on the basis of conditionality, which is politically unacceptable and exposes the lack of adequate and functioning political institutions in EZ.

In essence, the "German position" (actually northern) of "not a transfer union," serving as a non-starter to negotiate a political context for the case of European fiscal authorities replacing the lender of last resort, is a hidden political blackmail that (hopefully) will not work.

In other words, even if Greece and southern Europe were to *try* and follow a "German-projected mindset," there is no chance that this will happen in terms of usual debt and interest payments. The distance in too large.

Not only that, but the chances of success of such an attempt are very-very slim, unless the "German position" is modified (not simply moderated), so that they are willing to spend part of their surpluses, to boost German and (by imports) European growth.

One last thought. All the above is attainable. The toughest and less likely thing to allow the above is the preconception of northern Europeans --and mainly the Germans-- that money must be only credit and their resulting effort to constrain (and diminish) the role of the central bank and monetary policy, making markets the only lending source. This leads to a straitjacket for fiscal policy, which Germans have to understand *they cannot impose* on a union, or they'll have the union of the likes of them.

Three quarters of a century ago my stepmother's brother died on the shores of Normandie Beach in the "Great Crusade" liberating an imprisoned Europe from the clutches of totalitarianism. Is Europe now in the talons of cryptocorporatists and neoliberals who propagate an agenda of debt enslavement? The EU had an opportunity a decade ago to bind with the sinews of commerce Turkey to its southern flank,-- and it unwisely forwent that opportunity. There is what Ambrose Evans Pritchard (Telegraph) calls an "arc of instability" extending from African to the Near East. Greece has been a staunch ally in NATO; will the heads of state in Europe sit idle as the southern tier buckles? Where are Hoover, George Marshall, Konrad Adenauer and statesman of that caliber who understand that petty bondholders can undo a European order that extends 200 years back to the Congress of Vienna? It is now time for the politicos to implement a legal and equitable solution, let the bondholders take their write down, let the bondholders become equity holders in a vibrant and prosperous Europe.

perhaps someone of Mr Stiglitz's stature would venture to suggest an actual solution, rather than a snickering lecture? The answer to Lehman in the US has been that nobody else could possibly fail. Are we better off? The next crisis with zero interest rates will tell.
Greece cheated to get into Euro. How does it support European unity to reward such cheating? Binding partnership makes sense if all feel bound, does it not?
I remember what happened in Poland when the financial crisis hit. Polish currency lost about 50% relative to the dollar. Today, polish currency has about half the value it had relative to the dollar before the crisis hit. The same could have happened in Greece, had Greece not cheated to get into Euro. As a result, Poland is doing ok, not great but ok, while Greece is a basket case. What should the Poles say about the Greek tragedy? Probably the same Americans should say about "saving" of US banks. If you reward this sort of behavior, you simply prepare the ground for the next, more severe crisis. Americans, including prof Stiglitz, should quit snickering at Europe. I am not sure, by far, who is going to be the loser in the end.

i don't know why any of this would surprise the author. without directly noting the irony of his observation that social democratic europe was not regulated enough to prevent the crash, big-government europe is used to eggheads coming up with great ideas such as he euro and forcing them on the stupid populace, and just plain ordering people around, so why should it surprise anyone creditor nations just order around greece.

but don't go jumping to conclusions you are reading just another john boehner speech on the dangers of deficits and that greece should be punished by heaven for fiscal irresponsibility, because in fact, my solution for this problem is both simple and radical and will work--at least work as best as can be.

i suppose a lot of the unlucky people to make my acquaintance would call me a "chapter 11" lawyer. greece, if not a chapter 7 (liquidation) candidate, surely needed a reorganization. and let's not hear how governments are not people when it comes to economics--when it comes to a country being a debtor, ss opposed to simple monetary policy--yes they are--the creditors want their money, period.

but, wanting is not enough. the simple fact is that greece cannot pay and remain afloat with dignity. however, disclaiming its debt also puts greece in a pickle. the solution is that greece agrees to repay 100% of the debt and an agreed interest rate, but only out of "profits." if greece's economy doesn't grow enough to repay its debt, the creditors never get their money, because it isn't there. or, to make the deal more attractive, greece could always make sure to repay some portion of the debt, say 1%, per year.

but, what if the creditor nations will not accept this plan? in that case, then greece simply does disclaim the debt, and tells the creditor nations not to feel so high and mighty--they can't call greece stupid for mismanaging its economy--not unless the creditor nations are equally stupid-- because, after all, they are the idiots who invested in greece.

but, won't this lead to greece never getting credit again? of course not. with the slate either rearranged by repayment out of economic growth, or wiped clean by disclaiming the debt, new capitalists and nations willing to take on risk will show up at greece's door with money to lend.

nobody cares about the hapsburg empire debt any more. and 15 minutes after greece makes a permanent repayment out of growth deal or goes bust and starts over, nobody will care about greece's now almost decade long travails, either, because there will be money to make.

Stiglitz is a fascinating thinker but this is a really disappointingly simplistic article. Project Syndicate editors need to get tougher with contributors however exalted. Politically, I agree with much of the Stiglitz perspective - a massive primary surplus will be impossible to maintain. Yet surely the Greeks do need to make structural reforms ? Moreover, what are the implications for Spain of the Greek resolution. A Cyprus style deposit haircut may well lead to capital flight from Spain. On the other hand EU concessions to Syriza risk encouraging votes for Podemos. Project Syndicate needs to analyse the position in far more detail.

What do you mean with solidarity? Burning trillions of euros in a pit without bottom? Transfer payments that are prohibited in the treaties and constitutions? Giving up the rule of law principle? Please be careful: When the author writes about "visions" he just means other people's money.

It is elementary economics and political science, and in both disciplines were transgressed for everything logic. The purpose was to fortify the EU but the solemn incompetence has left evil to the UE, which has not been responding to the lack from central bank effectively that assumes the bad particular role, even more, has not supplied good answer to the lack of common policy Unionist support, so it became a predicament. But actually the situation has been dominated by neoclassical conservatives recipes and their banking interests, and both were underline as culpable from the crisis of the Great Recession of 2008, etc. In other way the contempt the UE forgot applying reiterative recommendations from Nobel: Dr. Paul Krugman and Dr Joseph E. Stiglitz , among others economists. So After all, Keynes theory was right, and the orthodoxes were wrong.

The economy is not a mathematical science is a social science, we are at a historical moment when we have to differentiate between economic and social union and I think, to continue with this economic policy, eternal utopia of the social union is dead. History will say that the neoliberal measures of the time wrong turned an economic crisis into an economic gap between countries that ended with a proposed union. As has happened before in the history of Europe the interests of a minority in each country have gone against the interests of the majorities in those countries and have used ideals such as nationalism, religion, class majorities to face some countries against each other as they presented their common interests. It is time to become aware of the interests of majorities in each country that are common to all of them, and not the elites

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